Overview
- The Treasury Department and IRS published a proposed regulation that would make any use of race, color, or national or ethnic origin in admissions, scholarships, loans, athletics, or other school-administered programs inconsistent with 501(c)(3) tax-exempt status.
- The proposal would delete parts of Revenue Procedure 75-50 and treat race-based considerations as disqualifying 'for any purpose,' meaning remedial or diversity-driven programs would no longer be allowed under the tax code.
- The rule would cover private K–12 schools, colleges, universities, and professional schools and would leave religious-only selection intact so long as selection is based solely on religion.
- The IRS is accepting public comments through November 3, 2026, and the agencies set an applicability date for taxable years beginning after May 31, 2027 if the rule is finalized.
- Treasury estimates about 18,000 private schools and roughly 750,000 students could be affected, and legal experts and education groups expect immediate litigation and a likely shift to race-neutral criteria that could reduce targeted scholarships and alter fundraising.